01811cam a22002417 4500001000600000003000500006005001700011008004100028100002100069245011200090260006600202490004100268500001900309520086000328530006101188538007201249538003601321700002101357710004201378830007601420856003701496856003601533w2088NBER20150303145201.0150303s1987 mau||||fs|||| 000 0 eng d1 aBulow, Jeremy I.12aA Constant Recontracting Model of Sovereign Debth[electronic resource] /cJeremy I. Bulow, Kenneth Rogoff. aCambridge, Mass.bNational Bureau of Economic Researchc1987.1 aNBER working paper seriesvno. w2088 aFebruary 1987.3 aFew sovereign debtors have repudiated their obligations entirely. But despite the significant sanctions at the disposal of lenders, many borrowers have been able to consistently negotiate for reduced repayments. This paper presents a model of the on-going bargaining process that determines repayment levels. We derive a bargaining equilibrium in which countries with large debts achieve negotiated partial default. The ability to credibly threaten more draconian penalties in the event of repudiation may be of no benefit to lenders. Furthermore, unanticipated increases in world interest rates may actually help the borrowers by making lenders more inpatient for a negotiated settlement. Finally, Western governments may be induced to make payments to facilitate reschedulings even though efficient agreements will be reached without their intervention. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aRogoff, Kenneth.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w2088.4 uhttp://www.nber.org/papers/w208841uhttp://dx.doi.org/10.3386/w2088